Some Zeek affiliates seek representation

Tuesday

Dec 4, 2012 at 3:40 PM

Thousands of former affiliates who profited from the alleged Ponzi scheme, Zeek Rewards, want representation in court.

BY NASH DUNNThe Dispatch

Thousands of former affiliates who profited from the alleged Ponzi scheme, Zeek Rewards, want representation in court.Since mid-August, court-appointed receiver and Charlotte attorney Kenneth Bell has been recouping funds connected to the now offline Zeek programs and their related companies. He hopes to return that money to nearly 1 million "investors" who lost out in the alleged scheme. Bell has made it clear he intends to recover Zeek funds from anyone who "ought not have it," including those affiliates who made money through using or recruiting others to the program rooted in penny auctions. He mailed out more than 1,200 subpoenas to those profiteers in late October, requesting they surrender records and their profits.Now, a group of Zeek Rewards profiteers say they want a voice in court to challenge the receiver's tactics. On Nov. 30, three affiliates, David Sorrells, David Kettner and Mary Kettner, filed a motion to appoint a representative for affiliates in U.S. District Court in Charlotte.The motion asks the court to appoint Dallas attorney Michael J. Quilling as examiner in the receivership proceedings. An examiner, who is most often used in bankruptcy courts, has been appointed in multiple past SEC receivership cases to represent the collective interests of victims.Quilling, a partner at Quilling, Selander, Lownds, Winslett & Moser P.C. in Dallas, said the affected Zeek Rewards affiliates deserve a voice before the court."Virtually all the actions being taken in these proceedings impact the lives of the affiliates in a very real way," Quilling wrote in a brief in support of the motion. He goes on to say, "For many of the affiliates, the Zeek Rewards program was their livelihood and full-time job. One more of the movants are in regular contact with thousands of affiliates around the world. "The message is the same — they feel that their rights are being ignored, they have no way to present anything to the court and none of them considered themselves investors or victims prior to these proceedings. All of them want some way to at least be heard as a group with respect to important matters which affect their rights."The federal government shut down Zeek Rewards and its related companies Aug. 17, alleging that the Lexington-headquartered operation raised more than $600 million through the offer and sale of unregistered securities. The U.S. Securities and Exchange Commission, which filed charges in Charlotte, also called the operation a "classic" example of a pyramid and Ponzi scheme.Lexington resident and former Zeek Chief Executive Officer Paul Burks settled with the SEC's charges without admitting or denying the accusations. He was forced to pay a $4 million fine and relinquish his role in the company. No criminal charges have been filed.Quilling, who has personally served as an SEC receiver for multiple cases in the past, made his first appearance in the Zeek Rewards case in September. He filed a notice of appearance on behalf of Fun Club USA, a Florida corporation that administered the website Zteambiz.com, which served as a rallying point for many affiliates who either profited from Zeek or were opposed to the program being shut down. For weeks, the website used the slogan, "Zeek Rewards affiliates united against what is believed to be unlawful action by the SEC."Quilling said Fun Club USA, which is also named as a movant in his motion filed last week along with the Kettners and Sorrells, is a figurehead for "thousands and thousands of people" who want to be represented. The motion he filed, however, asks that the court appoint an examiner to represent the interests of all affiliates and creditors, regardless of whether they profited or lost money.Bell estimates that 100,000 affiliates took out more money than they put into Zeek Rewards, including some who made upward of $500,000. He said while there are more than 2.2 million total Zeek Rewards users, only about 1 million put money in the program.Jeff Ashby, a former Zeek Rewards affiliate from the Hickory area, said he hopes the receiver seeks every dime from those who profited through the program. After buying into Zeek Rewards for $10,000 in April, Ashby made nothing by the time the government shut the operation down."If it was an illegal scam, then I don't think anybody has a right to keep anything," Ashby said. "If they put $10,000 in, I think they should get their money back. If they made more than that, I think they should give it up."Ashby, a former Marine, said he felt deceived and led on by the program and those upper-level affiliates who ensured it was legitimate. He said if he had lost his money in a legitimate investment opportunity, he could have walked away without a gripe, but he said he feels scammed in this situation."It's not like I'm in dire straits, but that was money I wanted to better myself and my family with," Ashby said. "That's a pretty big hit for me."Bell, who could not be reached for comment, stated to the court that he opposes the motion to appoint an examiner to the case. If the court does appoint an examiner, he would be paid out of the receivership estate, according to the filing.For more information on this receivership case, go to www.zeekrewardsreceivership.com.Nash Dunn can be reached at 249-3981, ext. 227, or at nash.dunn@the-dispatch.com.